THE RIGHT FIT FOR THE WRONG REASONS: REAL BUSINESS CYCLE IN AN OIL-DEPENDENT ECONOMY
Venezuela has an oil-dependent economy subject to large exogenous shocks and a rigid labor market. These features go straight to the heart of two weaknesses of real business cycle (RBC) theory widely reported in the literature: neither shocks are volatile enough nor real salaries sufficiently flexib...
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| Autor principal: | |
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| Lenguaje: | English |
| Publicado: |
Pontificia Universidad Católica de Chile. Instituto de Economía.
2016
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| Acceso en línea: | http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0719-04332016000100004 |
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| Sumario: | Venezuela has an oil-dependent economy subject to large exogenous shocks and a rigid labor market. These features go straight to the heart of two weaknesses of real business cycle (RBC) theory widely reported in the literature: neither shocks are volatile enough nor real salaries sufficiently flexible as required by the RBC framework to replicate the behavior of the economy. We calibrate a basic RBC model and compare a set of relevant statistics from RBC-simulated time series with actual data for Venezuela and the benchmark case of the United States (1950-2008). Despite Venezuela being a heavily regulated economy, RBC-simulated series provide a good fit, in particular with regard to labor markets. |
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